Data Sheet—Forcing Facebook to Behave

Why does Facebook show such disregard for user privacy? The best answer may be “because it can.” For years, the social network has engaged in shady tricks to wring every last dollar from our data, and regulators haven’t done a thing.

This could soon change. I spoke this week with Georgetown University law professor David Vladeck who predicted the FTC will wallop Facebook with a fine “in the ten figures” over its recent privacy shenanigans—such as bartering user data with third party firms like Cambridge Analytica and, as new reports reveal, creating whitelist access for the likes of Airbnb and Lyft.

Vladeck is in position to know. As the former director of the FTC’s consumer protection bureau, he imposed a consent decree on Facebook for playing fast and loose with consumer data way back in 2009. The arrangement obliged the company to pledge it would get consent to share users’ information with third parties, and that each single violation could trigger a fine worth tens of thousands of dollars.

Facebook CEO Mark Zuckerberg has publicly stated he does not believe the company breached the decree, but Vladeck and other former FTC officials don’t see it that way. If the latter are right, the outcome could be a fine of $1 billion or more.

The question is whether such a fine will prompt Facebook and other tech companies to change their ways. It’s hard to believe that it will. Facebook executives appear to have calculated long ago that a fine, even one for $1 billion, was the price of rapid growth and one that it could well afford. The calculation has paid off: Not only has Facebook turned user data into an advertising gold mine, it has also used it to squelch competitors and maintain a monopoly. Why should it have acted any differently?

For companies to take privacy seriously, the U.S. requires a different legal regime. Right now, regulators must rely on the odd consent decree system, which gives companies a pass on their first major privacy violation, and then lets them quibble about subsequent violations. Other countries take a more straightforward approach: They have privacy laws and go after firms that break them.

Fortunately, something may be stirring in Congress. In the wake of recent data breaches, companies and lawmakers are talking seriously about a national privacy law. Maybe this will finally change how the likes of Facebook look at our data in the first place. Have a great weekend.

NEWSWORTHY

Latest on l’affaire Huawei: Chinese propaganda channels called the U.S. a “despicable rogue” for its arrest of Huawei’s CFO over alleged Iran sanctions busting. Meanwhile, the WSJ reports the arrest came after HSBC alerted the Justice Department to suspicious transactions, and the NYT describes mounting global suspicion of Huawei as a “conduit for espionage and sabotage.”

Crypto layoffs: Consensys, the Brooklyn-based backer of dozens of crytpocurrency projects, is axing 13% of its workforce at a time when it is “re-focusing … priorities.” The outfit, whose efforts are based around the Ethereum blockchain, reportedly has an annual burn rate of $100 million.

Microsoft and facial recognition: As Adam previewed yesterday, Microsoft’s Brad Smith has suggestions for facial recognition “to ensure the year 2024 doesn’t look like…1984.” They include new warrant requirements for police using the technology, and more transparency from companies that are building it.

Amazon at the airport: The retail giant is reportedly in talks with LAX and other airports to introduce its Amazon Go cashier-less stores, which have already popped up in several cities.

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FOOD FOR THOUGHT

In 2016, Uber’s former CEO said the company would go public as “late as humanly possible,” reflecting an era of loose capital when unicorn startups called the shots. Now, with a recession looming, the unicorn crowd is rushing to IPO:

The moves by Lyft and Uber indicate how tricky it can be to decide when to go public at a time when stock markets have been turbulentand the broader economic picture is muddied. The calculus for when a company publicly lists its shares is often a moving target, but Uber’s and Lyft’s actions will carry particular weight with a swath of other highly valued Silicon Valley start-ups that are also preparing to approach the public markets.[…]

Any stock market debuts of these companies will be the final chapter of the era of “unicorns,” the privately held start-ups valued at more than $1 billion. Many of these companies, which were born after the 2008 recession, rode a wave of smartphone adoption, turning businesses like taxis or grocery delivery into on-demand services. They also benefited from abundant capital from private investors, which was driven by low interest rates.

BEFORE YOU GO

iPhone solves a murder. In the latest example of law enforcement turning to our personal gadgets to crack cases, UK police used a man’s Apple Health app to prove he killed his wife. The man had staged a burglary to cover up the murder, but the iPhone revealed he was “moving frantically around the home” at the time of the crime.